Mercy Iowa City bankruptcy, acquisition, puts access and affordability in question

The recent bankruptcy of Mercy Iowa City, a 150-year-old pillar of the local health care community, has sent shockwaves throughout Johnson County, Iowa. The acquisition of Mercy's assets by the University of Iowa Hospitals and Clinics (UIHC) and the closure of our community hospital raises concerns about the implications for local health care access, affordability, and competition.

While our community should be relieved that UIHC has pledged to keep a community hospital at Mercy’s location, it is essential to illuminate the importance of competition in healthcare and why it is unlikely that alternatives will enter the market, leaving the community with a UIHC monopoly.

The importance of competition in health care

Competition in health care plays a pivotal role in ensuring access, affordability, and quality of care. A competitive health care landscape offers several benefits to the community:

Choice and access: A competitive health care market gives patients choices when selecting a health care provider. Patients can choose a provider that best suits their needs, preferences, locale, and financial situation.

Quality: Competition encourages health care providers to enhance the quality of their services to attract and retain patients. Health care providers invest in the latest technology in a competitive environment, hire top talent, and prioritize patient satisfaction and the patient experience, hoping to become your preferred provider.

Lower costs: When multiple providers vie for patients' business, they are often incentivized to offer competitive pricing. Competition drives health care providers to be more cost-effective and efficient, which, in turn, can lead to reduced medical costs for patients.

Innovation: Competition fosters innovation, leading to the development of new treatments, cost-saving health care delivery models, lower-cost technologies, and service site alternatives. New entrants often bring fresh perspectives and ideas to the market, challenging existing entities to evaluate their current operations.

The threat of a health care monopoly

Mercy’s bankruptcy asset sale package scheduled for Nov. 6 includes Mercy Hospital and Mercy Services, a series of primary care clinics across eastern Iowa. In addition to becoming the sole hospital provider in the area, UIHC will control those clinics that refer patients to hospitals for specialized treatments. This raises additional concerns about the monopolization of the local health care sector.

Many will argue that Mercy’s exit from the market will open the doors for a new entry. However, the Johnson County area poses unique barriers for new entrants to the health care market. The University of Iowa's use of non-compete clauses in provider contracts signing new employment agreements at the new community hospital will prevent health care professionals from working elsewhere in the county, reducing the hiring pool for a market-entering competitor.

UIHC is an academic research center as well as a state entity. Because it is a tertiary care system, it charges more for and gets paid more for procedures that can be performed in a community hospital. For example, insurance companies like Wellmark pay UIHC more for an outpatient orthopedic procedure than they would pay for the same procedure at Mercy Iowa City. The procedures previously directed to Mercy will now fold into the UIHC system. Is there any doubt the higher cost in our community will translate to higher patient bills and more expensive health care insurance premiums for employers and employees?

The lack of alternatives in the market, compounded by factors such as non-compete clauses and tiered networks, and the difficulty of establishing a primary care network poses significant challenges to the community's future access to affordable, high-quality care.

Our community should take note: Mercy became terminally ill when it was removed as a Tier 1 provider several years ago because, overnight, UIHC employees had to pay more out of pocket to go to Mercy. This is enigmatic, given that the cost of care charged to patients and insurance companies is lower at Mercy than at UIHC. Effectually, a state agency and the community’s largest employer took steps that, even if an unintended consequence of establishing a narrow network, eliminated our community hospital over time.

Residents of Johnson County need to advocate for policies that promote competition in health care, ensuring that their health care needs are met with affordable, high-quality options.

A few days ago, I fielded questions from anti-trust lawyers who asked about the potential monopoly if UIHC takes over Mercy. I shared that I am appreciative and supportive of UIHC because our community will maintain a community hospital that would otherwise close.

I also shared that I thought UIHC, being named the auction winner for Mercy’s assets, could agree to two essential conditions:

• UIHC will eliminate non-compete clauses in their physician contracts.

• UIHC will not exclude non-UIHC providers from Tier 1 of their employee health plan in the future.

These two conditions address the future hiring of physicians if a competitor is interested in entering our community because they could hire from within our community and wouldn’t be excluded from our community’s most extensive employer insurance plan.

Conclusion

The bankruptcy of Mercy Iowa City and the subsequent acquisition of its assets by the UIHC has brought to the forefront the critical role competition plays in health care. When the sale closes, UIHC will likely have an absolute health care monopoly, resulting in higher healthcare costs in our community and deterring competition.

While it will be tough for a future community hospital competitor to establish a primary care network in our community, being able to recruit from within the community and serve all patients in the community would help balance the playing field for future health care competition. It would also preserve the few remaining independent private practices in our community.

This will be especially important if UIHC closes the Mercy Iowa location when it opens its new hospital in North Liberty.

Patrick Magallanes is the president and CEO of Steindler Orthopedic Clinic.

This article originally appeared on Des Moines Register: Iowa City health care market needs competition, access, affordability